Officials from the country’s largest pension fund said Thursday they’d welcome the opportunity to invest in Canadian infrastructure but there’s been a limited supply of suitable assets available to purchase.
“If the opportunities were there, we’d love to look at them. We’d love to invest in them. It’s just a scarcity of opportunities,” said Mark Machin, CEO of the Canada Pension Plan Investment Board (CPPIB).
He said the CPPIB is constantly on the hunt for purchases around the world but finds itself frequently outbid by rivals when infrastructure comes on the market.
“That’s terrific for governments. It’s terrific for sellers. But when you’re competing to buy, it’s really razor-sharp pricing,” Machin said.
“So we’ve been quite cautious on where we’ve added assets.”
Machin and CPPIB chief investment strategist Ed Cass said they’d prefer to invest in late-stage infrastructure projects or completed projects rather than “green field” developments that need to be approved and built before they generate cash flow.
Cass said that the new federal infrastructure bank, which is being created by the Trudeau government, will be able to “package” opportunities for late-stage investors after going through the early stages.
But Machin said that CPPIB faces no political pressure to invest in Canada, or the infrastructure bank, because the fund has a clear mandate to maximize investment returns and operates at an arms length from all levels of government.
“We’re shielded from anything along those lines,” Machin said.
His comments were made as CPPIB, created in 1999, announced that 2016-17 marked one of its best years for investment returns in a decade. As of March 31, when CPPIB’s financial year ends, it had $316.7 billion in assets — up $37.8 billion from a year before through a combination of market gains and new funds.
That trails only the $45.5 million increase in 2014-15, the biggest in the past 10 years.
For 2016-17, the fund realized a gross return of 12.2% or 11.8% in net return after all costs. For the 10-year period, CPPIB’s annualized gross return was 6.7% or 5.1% on a net basis.